Okey dokey. Good morning, everyone. Thank you for joining us on day three of Baird's 55th Industrial Conference. Today we have the pleasure of hosting EMCOR. I'm Justin Hauke. I'm the Senior Associate covering specialty contractors and engineering construction companies along with Andrew Whitman. From EMCOR today, we have Tony Guzzi, the company's CEO and Chairman. We have Jason Nalbandian, the company's CFO, and many other roles, I guess, and then Lucas Sullivan, who's leading investor relations. We'll do this as a fireside. I'll let Tony give his little commercial on it, and then we'll just run through some questions. If you have anything that you want to email, session 2 at rwbaird.com. OK, we're going to get going here. We're going to show you a little video. Wake everybody up. All right, how lucky are we, right, to be able to be in a company like EMCOR? So what is really EMCOR? We actually do real work. We're not a general contractor construction manager that manages a bunch of other contractors. We are a company of skilled tradespeople: plumbers, pipe fitters, electricians, welders, sprinkler fitters, millwrights, HVAC technicians. Venture to say, maybe other than one or two other people, one other person here, we're the largest employer of trade labor in the country. And these are highly skilled people. Most of them are great not only in building things, but they understand how systems work. And a part of our business, we know how to make sure you fix it and keep the building running. If you think EMCOR at its highest level, we are a project-oriented company that also has a maintenance element to it. If you think just macro level, the projects we're doing are anywhere from 12,000 plus projects a year. They really fall into three buckets size-wise. Still, a third of our projects today are still less than $1 million. The next third falls somewhere between $1 million and $10 million. The third above that are $10 million plus. The ones that have grown most rapidly are those projects that have grown more than $10 million. There are major trends driving that. The major trends that are driving that are the things most of you are here to talk about today. It's data centers. It's high-tech manufacturing. It's high-tech manufacturing not only to use semiconductors for pharma and bio life. It's health care. It's hospital construction. It's water and wastewater. EMCOR is a very diverse company. We have diversity of demand, which probably sets us apart from some of the people you've been talking to over the last couple of days. Yes, we are a major data center builder. I would venture to say we have more penetration, especially on the electrical side and the fire protection side, than any contractor in the country. We also, though, do a lot more than just data centers. You'll see that in our RPOs. Our RPOs are up more than almost 30% year over year. We also have great capital allocation. We're a company that acquires very well, as shown by our acquisition of Miller Electric. That would be the largest acquisition we've ever done. We're very pleased with it. Also bread-and-butter acquisitions, which for us are somewhere between $50 million and $300 million plus, somewhere in that range. We do a lot of bolt-in acquisitions that go into our existing subsidiaries where we're buying a small company that gives us either more technical capability, more technicians, or puts us in an adjacent geographic market that we were not in before. You think about EMCOR and you go by our segments, we basically are going to, by the end of this year, we'll be going to market through four segments. They all work together, especially the mechanical and electrical construction segments. They're serving the same customer base. If you go to the electrical segment, which has been growing mid-teens for a while organically, that is 100% union IBEW. We go to work there through about 25 subsidiaries. Those 25 subsidiaries, for the most part, are people that started their careers and that run our subsidiaries that started their careers as apprentice electricians. Some of them today are running a $500,000,000 business. Suffice it to say, they know the work. The mechanical segment has plumbers, pipe fitters, HVAC technicians, and millwrights. It is about an 80% union delivery. On the construction side, especially the core piping, it is near 100%. Those are run by also people from the field, but also engineers, people that started their careers being project engineers and project managers. You go to building services, three quarters of the building services segment today is our mechanical services business. You ask what is the difference between the mechanical services company and the mechanical construction, at the highest level, it is probably a distinction without a difference because they are skilled pipe fitters. However, our mechanical service companies, for the most part, are doing smaller projects. They work in the aftermarket for the most part, where the owner is either directing, the general contractor uses, or we're working directly for the owners. We have about 2,000 HVAC technicians in that business. That business is a high single-digit EBITDA or operating income business and has been growing GDP plus 200 or 300 points for a long time. It is a mid-single-digit growth rate. I think it is probably the best representative of what is happening in the general economy outside of those major sectors that are going on. The balance of that segment is our site-based business, which is doing route technicians or putting people in buildings. We get some spillover effect into our mechanical service business. We have the industrial services segment, which is for us mainly an oil and gas business. We do some intermittent energy work there, slash renewable work there. We can EPC and build solar farms at utility scale. That is generally EMCOR. With that, we'll flip it over to you. Take questions. Yeah, no, that was a great overview. It kind of touches on a lot of things that I want to maybe elaborate on. I guess maybe starting with one of the things that's really clear, I think, from this conference, but just in general, is one of the critical bottlenecks is people, particularly craft labor. I guess how does EMCOR, there's other companies that are in the market that are also contractors. How do you guys differentiate? How do you recruit people? I think the biggest differentiation for us is the value system that our leadership works under. At EMCOR, again, go at its core. I talked about, but our product is not electrical and mechanical construction or even mechanical services. That is not the core product of this leadership team. I'd venture to say we build the best field leaders in the industry from foreman and up. If you do that right and you are a values-driven company, which we are, people want to work there. The people that are recruiting that trade labor to come and work for us are people that are like them. I talked about on the electrical side how a lot of our companies are run by folks that came from the field. The two or three that are not have been in the business their entire lives. You're getting recruited by somebody that knows the work. Have deep respect for what we do. We're going to train you. You think about why tradespeople would come to work for us versus other people, whether it's union or non-union. Start with, I'm going to get paid every week. That's not a given in a smaller contractor. Second thing, and in no particular order, you're going to keep me safe. This is inherently dangerous work we do. We have industry-leading safety and recordables. We are Six Sigma. I always think about that, and I take a deep breath because we're doing dangerous things today. We are Six Sigma versus the industry in safety. We have never turned down a safety investment. Our people know that. You're going to work for people that know the work. We've all worked. There is nothing more frustrating than having someone you work for that has no idea what you actually do. At EMCOR, all the way up to me, people know that we know what they do. At the field level, they are great contributors to means and methods. If you do a good job, you have a chance to be part of our core team. In our contracting, we have those 30,000-35,000, depending on the day, skilled tradespeople. About 20,000-25,000 of those always work for us. That is their career. The rest are coming in and out, depending on the peaks in the business. They are either out of the union or where we are non-union. They are in or out non-union. Most of the construction is done union. If you do a good job, I can build a career with you. If I want to, I can be the foreman, the general foreman. I can be the superintendent. You are going to give me the training to do that. Again, go back to this building great field leaders. We have a stair-step training program that is pretty well known in the industry and that I think is fairly unique to us. Because by the time you get taught, we are not talking to you about project management. We are talking about how you should lead people in the field to do all those things I talked about so they can build a career. Maybe one more on that labor segment. You mentioned union a couple of times. Just because I get the question all the time, and I know we had the pleasure of having dinner last night, and it came up a lot. Maybe you could just talk a little bit about it. Sometimes I think people do not really understand what union means. Maybe talk about the benefits, disadvantages, whatever, of union versus non-union, how you can move across the two. I think, again, go to this big project work we're doing. Go to the most part for our core construction markets. We are a union contractor. I personally look at that on those large projects, and I think our whole team does, as a real source of strength. You can always recruit somebody to go from non-union to union. Unless it's a horrible recession, a union tradesperson isn't going union to non-union. The great thing about this expansion we're in right now is we're replenishing the union ranks and building a whole new generation of leaders. If you just think about economically, it makes all the sense in the world that most construction would be done union. The benefits are with the union. They can go back to the hall and be redeployed to a contractor that has work. It's a better working situation for the individual tradesperson. It's actually a much easier company to work in for the recruitment and development of labor than a non-union contractor. We do both. On the mechanical side, we have some prime contractors in the Southeast. In our industrial service business, the other thing, union, you very rarely get stuck with excess labor. In the non-union world, a lot of times you can get stuck with excess supervision labor because you're always afraid to let them go. They typically are better trained. Then there's this image that they're completely inflexible. Yes, there are markets in New York, San Francisco, that if you had to use that model and grow it across the country of working with the union, you probably wouldn't be very successful. The IBEW, the UA, especially with respect to how we build out these mega projects, have been fantastic partners. It has allowed us to build a workforce. Jason, we look at this a lot. Yeah, I mean, I think that flexibility aspect of to be able to release workers that go back to the union hall, you almost want the stable that you can always kind of go to. That's right. Look, I see both. We have both. On average, a union journeyman electrician is far better than his non-union counterpart. I feel very comfortable saying that in any crowd, anywhere. The union foreman and superintendents are great athletes. They're great player coaches. They really know means and methods. OK, maybe the next thing to kind of go to, I mean, we can talk about the end markets. I think it's really clear what's strong and everything else. One thing financially, I guess, is your margins have really improved over the last several years. When I think about contractors, typically they have mid-single-digit margins. On a good day sometimes. On a good day, fine. You guys are kind of double that. They've trended closer to 10%. Maybe just talk about, is that a dynamic of how good demand has been? Some of the things that you guys have done internally, technology-wise, that have changed that? I don't know if this is a good question for you. Yeah, I'll start, and I'm going to kick it to Jason relatively quickly. I mean, clearly, if you're not in a durable demand market, you're not going to make the margins we're making because you're not going to get the absorption on our overhead. And you're not going to be looking for ways to take labor out of the business and to be innovative. Because go back to the search for labor. Because of that, it forces you to be innovative with prefabrication, VDC, and BIM, which then enhances your margins. And then we do other things to enhance the margins. Go to safety. Safety is a big deal on margins. Just between VDC and BIM. Virtual Design Construct and Building Information Model. BIM fits underneath there, which then leads to prefabrication. A lot of people talk modular. We talk prefab, same thing. Maybe modular, they tend to sell to other people. For the most part, we only do fabrication for EMCOR. There are some exceptions, but you never say 100% in a company is a big margin. Jason, you've done a lot of work on margins. I think for us right now, when you look at margins, it's a combination of factors. Some of it is demand environment. A lot of it is execution. Some of it is, as Tony just said, the investments we've made in prefabrication and virtual design construction and BIM. If you just look over time, EMCOR is not a capital-intensive company. I think our CapEx is something like half a percent or 0.6% of revenues. If you look over the last three years, we've made several investments in CapEx. If you look kind of at a three-year CAGR, revenue is growing 14%-15%. CapEx has grown 28%-30%. Almost two times that of revenue. That's the investments we're making in the BIM, VDC, prefab, the things that are making us more productive, the things that are making us more efficient, the things that are helping drive margins. You say, what's the outcome of that? You look at revenue and you look at headcount, and you see a spread between the two where we've been successful at growing revenue really three times the rate we're growing our headcount just because of these investments we're making, which are making us more productive on the jobs. You think about something which BIM's been around for a while, but you think about what we're doing now, especially on these larger jobs. The reality, engineers are taking jobs, engineering firms are taking jobs that may be 40%, 50% complete. We're actually completing it with our internal engineering. That allows us to design for constructability. We're finding the mistakes in 3D and even beyond before we ever go to the job. If you go to a job site today, you see these monitors. A lot of gangboxes will have something a little smaller than this where they're going to look at what they're going to build today. Ten years ago, that would have never happened. It was just starting to. You think about, I go back to what I talked about workforce development. That's part of the margins. Because we have a whole new generation of folks that are taking leadership roles, they're much more friendly and familiar with technology, which allows them to bring that to the job site and allows us to push more work back into our shops because they're not averse to it. It's something they understand. Yeah, I mean, and I guess, and especially, I mean, this probably doesn't apply as much to that third that's a million dollars or less, but the bigger jobs, this is almost like table stakes. I mean, you're taking a lot of labor out by being able to have a controlled environment. Jason, go through the numbers on revenue growth versus labor growth, and that's where you see it. Yeah, so as I said, we've been growing revenue like three times. The growth rate's been three times our labor growth or our headcount growth rate. If you just look, let's say, five-year period, CAGR on revenue is probably 10%, and the headcount CAGR is probably 3%. If we were trying to do what we're doing today with the same means and methods we were doing 10 or 15 years ago, our growth would be stunted because we wouldn't be able to find the labor we need to complete that job. I've got a couple of questions that have come in here that I'm going to get to. I want to maybe do two more things to just orient everyone. Maybe the next question would just be on kind of portfolio allocations. Because you guys do a lot of different things. The building services is not construction, but it's more the maintenance stuff. You recently exited the U.K. business. Maybe just talk about, from a high level, how you think about the portfolio, where you want to do M&A, because you guys have been an acquisitive company and just kind of where that focus is. Yeah, so if you take a five-year look, or actually a six-year look, if you go back to 2019, it's almost perfect balance on capital allocation. High level, Jason, we're. We're near 50/50. If you look at business reinvestments, so-called organic growth, M&A versus shareholder returns, so our share repurchases and dividends, we're near 50/50 balance on capital allocation. I think that's what the future looks like. To me, that's, and we're a low-leverage company, and we're going to stay a low-leverage company. We actually compete on our balance sheet. Because our customers, you think who they are? Who's actually funding this growth right now? Their balance sheets look a lot like ours. That's an expectation. It allows us to have where bonding's needed to never have to go hustle for a bond like a lot of these PE-owned contractors do now. I think the U.K. exit, home run. Home run. It'll close by the end of the year. Great team. Most people in the room don't know our long history in the U.K. It was part of the original predecessor company to EMCOR. It used to be a big construction company that lost money, lots of money. We shrunk it down, reformatted it, had great management teams. We got it to be a very successful facilities management company that was a highly desired asset to other people in the U.K. We were not going to invest to the level we needed to. The next move was to take it into Europe. That play has been out there for a while. We were not going to do that. We have other places we can spend our capital. People would ask, was it a distraction? Not with the management teams we had. It really was not a distraction. Fifteen years ago, it was. For me, it was the culmination of a 15-year effort. I think the new owners will be served well. It is a great team. I think it is a great outcome for EMCOR and its shareholders. If you look at the rest of the portfolio, we're looking at stuff all the time. Every day is a resource allocation game as a contractor if you run the business right. You're thinking about how to maximize margin. Building services, two-thirds of it is mechanical services. A third of it is site-based services. Site-based services takes little to no capital. Mechanical services is probably the most steady business we have at EMCOR. It's a high single-digit EBITDA ROS business. Near 100% return on that asset business. We are a market leader. The site-based business is an important part for some customers for us to know how to do. Industrial services is challenged. Great team, by the way. Go to the distraction point, no distraction, great team. Very difficult customer base right now. They think zero is a good number for people to earn sometimes. Justin, you asked about M&A. I think for us, it's really core markets. Definitely U.S.-based electrical construction, mechanical construction, and mechanical services. Those are the areas where we want to invest in building automation and controls. Yes, this is not a global business. It is emphatically not a global business. People have tried to get us to do that. Think about it. What is our advantage? It starts with great skilled labor, knowing the local market conditions, being able to deploy it and attract it. There are whole swaths of this world where they do not value skilled labor. They just throw more people at it. They do not do it necessarily in a safe and productive manner. This is emphatically a U.S. business. We have done very well. We have plenty of opportunity to grow it as a U.S. business. You mentioned the return on assets being really good. Obviously, you are capital light. I mean, I think one of the things, if you just look at it from a high level, and you are a GAAP reporter, your ROIC has been consistently 20% plus. Can you just quickly run through kind of the growth algorithm that you see? Obviously, there are puts and takes all the time. Margins can move around. Just kind of where you see margins holding, kind of top-line growth, free cash flow conversion. I think, and Jason, jump in if I get over my skis here. I think our construction businesses for the foreseeable future organically can grow high single digits. That will be driven by things like data centers, health care. High tech will come in and out on the semiconductor side. Core markets like traditional manufacturing, Water, wastewater, and just small projects t hat still exist in our construction business. Again, that is our electrical and mechanical segment. I think our building services segment is a GDP plus grower, so maybe 200 or 300 points above GDP. Our industrial services segment is going to bounce around depending on the turnaround schedule. Maybe go through some interesting stats when you think of, and then margins. Margins as a contractor are going to move in bands. Jason will give you how we look at the business here in a minute. They move in bands. You're not going to be 14. We don't get to keep, we don't do the same thing twice. We do sort of the same thing sometimes. Turnover is just. Yeah, we get to keep our ideas. This isn't a manufacturing plant where we did these productivity initiatives a year before, and then we get to lock it into our standard costs as we sort of know what our margins are going to be. We close out jobs. We start jobs. We invest in new markets. They have lower margins inherently initially. We have GMP contracts versus fixed price that we do loans. We have target price contracts versus this. Sometimes we're doing more T&M. Same thing with RPOs. Sometimes the contract gets laid out. It'll be a $200 million. We are a GAAP reporter not only on our numbers. We are a GAAP reporter on our RPOs. It's real contracts, non-countable portions. Sometimes we look a little different. We're pretty sure you're all smart enough to add back amortization and depreciation by segment when we give it to you. I think the key thing on the margins, though, is that they will bounce around. It's a project-based business. We've gotten a lot of questions on our electrical segment margins in the quarter. For overall EMCOR and for each of our segments, what we've said is if you look at a rolling 12-24 month average, that's about where margins should be for each segment for consolidated EMCOR. They'll bounce around quarter to quarter. If we just take electrical, for example, over that eight quarters that make up that 24-month average, they've been as low as 10%, as high as 15.8%. They'll bounce around. On average, they'll come back to a rolling 12-24 month period. The growth, we've done a lot of analysis on that. If you look at growth, let's take our construction segments, for example, and you look at broader non-res. If you look over a five-year period, we have a history of growing 500-600 basis points above the broader non-res market. And we think that ratio should hold true into the future. If you look at consolidated EMCOR, that's probably 200-300 basis points above the non-res market. These are over a long period of time. The other thing that I think people get confused about, and I'll hear this, they talk about market share. That is the most meaningless, first of all, define the market for me. I've been doing it combined with my time at Carrier, and I grew up around it. There is no definition that would allow you to get to a real market share number. Define the market. That's not how we think. We think opportunity, and we think about building out a business in a geographic or end market. As contractors, we typically take a two- to five-year view of the world. We're not building products with IP in it that you have to have a 10- or 15-year view of the world. We can move our resources between. I'll give you a great example. We have gone from servicing three or four data center markets in 2019 to today, 17. How do you do that? You take some of your existing assets, your companies that have great electricians and supervision that did a lot of either hospital work or industrial work. You take other people from other parts of the company that are willing to do it, and you train them up how to do that. Great success doing that. How else do you do it? You acquire. You take someone that maybe cannot take the next step to do hyperscale work, was only doing a piece of it. Again, you have people that are expert at it. The two gentlemen that run our electrical and mechanical segments, venture to say, Brian and Dan are probably no more about how to build a data center or a high-tech manufacturing plant than anybody in the country, mechanically and electrically. They know how to move our resources to get someone started into that business, whether through organic growth or acquisition. Or it's not our preferred method. We'll go start up an operation in a new market where a customer asks us to come in. They want the right part of that risk with the right contracting mechanism when we go in. We do it all three ways. We've gone from two markets mechanically to over seven today. Fire protection, we can serve every market in the country, which is sprinkler and fire alarm. Just because we're getting close to the end of time, there will be a breakout down the hallway. Just because you mentioned the data center so much, one of the questions from the audience was just, how do you manage if and when there is a downturn on that, given how the projects have gotten so much bigger? I guess your variable cost and protection. Yeah, I mean, clearly, what's it, 25% of our business today? It's 24%-25% of our revenue. Yeah, it's all, like it's gotten half, 12.5% of your business is gone. Wouldn't be the first time we went through that. What do you do? What's the playbook? First, you look for other opportunities. My guess, the data center market takes a big correction. We got a lot of manufacturers in trouble. Ever been to a site and see all the switchgear, chillers, air handlers, CRAC units, and lots of stuff on those sites, right? We know how to cut costs. We're really good at it. The real sort of underlying principle of EMCOR, metrics-wise, is return on net assets. That's how our people get paid. When we go through, look, we have parts of our business in geographies that are in downturn today. We're a big company. What do they do? Again, we have a flexible workforce, especially on the union side or even the non-union side, the tradespeople. There's little or no severance costs. We revert back to our core people. Some of our foremen become working foremen or journeymen again. We live to fight another day. That's why we don't make huge fixed cost investments as a contractor. We try to stay as flexible and as nimble as we can. It's why we don't buy all our lifts. It's why we don't buy all our vehicles and we lease them. It's why we're one of United Rentals' biggest customers for rental companies. It's why we carefully add prefabrication space. We're going to add 450,000 sq ft this year. The way we look at that space is as a three-year payback. We have pretty good three-year visibility right now. I'll leave you with this one thought. I did this on our earnings call. Some of you heard that. We recently had 80 of our data center team, our team, together at Miller Electric about a month ago, maybe six weeks ago. Great interaction of ideas, all that. B2Ls came. I will not give you their names. Four of the big hyperscalers, the owners, they wanted to make sure we were on the journey. They showed us their building plans. Until 2031, it looks like we are going to be pretty busy. It also looks like they cannot keep up with demand from the people that are building their product. It also looks like they have power through that. With the gas turbine, and the only way out of this is gas turbines in the short term, the next five to eight years. The gas turbine companies are all sold out until 2031. I think there's a lot of things that will be good. We can catch you in the breakout if you have more questions. Thank you all for your interest in EMCOR. We're pretty proud of the company we've built over a long time. Thank you very much.